the regular members of the Council of Money and Credit and their substitutes;

Transcription

1 REGULATIONS 2002

2 REGULATION OF FEBRUARY 17 TH, 2002 SETTING THE CONDITIONS FOR ESTABLISHING THE FILE OF APPLICATION FOR AUTHORIZATION TO INVEST AND / OR SET UP REPRESENTATIVE OFFICE ABROAD OF ECONOMIC OPERATORS UNDER THE ALGERIEN LAW The Governor of the Bank of Algeria, Whereas Law of April 14 th, 1990 on Money and Credit amended and supplemented by Order of Dhu Al Hidja 4 th, 1421corresponding to February 27 th, 2001, namely its Articles 43a, 44 paragraphs k and i and 187 ; Whereas Order of September 26 th, 1975 as amended and supplemented on the Commercial Code; Whereas the Presidential Decrees of June 2 nd, 2001 relating to the appointment of the Governor and Vice-Governors of the Bank of Algeria; Whereas the Presidential Decree of June 2 nd, 2001 relating to the appointment of appointment of Members of the Board of Directors of the Bank of Algeria; Whereas the Presidential Decree of June 2 nd, 2001 relating to the appointment of the regular members of the Council of Money and Credit and their substitutes; Whereas the Resolutions of the Council of Money and Credit of August 22 nd, 2002; Whereas Regulation of December 23 rd, 1995 amending and replacing Regulation of March 22 nd, 1992 on the exchange control; Whereas Resolution of the Council of Money and Credit of January 17 th, 2002 ; promulgates the regulation the content of which follows:

3 Article 1 : The object of this Regulation is to set conditions for establishing the file of application for authorization to invest and/or set up representative offices abroad of economic operators under the Algerian law and to determine terms and conditions to transfer funds to insure the financing of activities abroad, additional to activities for producing goods and services in Algeria as well as the repatriation of surplus income and / or profits. Article 2 : Setting up economic operators under the Algerian law abroad, whatever the legal form it may have in the host country, shall be subject to the prior approval of the Council of Money and Credit. Article 3 : The economic operator under the Algerian law which plans to set up a representative offices or invest abroad in order to pursue an activity additional to activities of goods and services in Algeria shall have a request from the Council of Money and Credit by the authorized person, for the purpose of obtaining authorization from the Council of Money and Credit, provided for in Article 187 of Law on Money and Credit as amended referred to above. Article 4 : The request referred to in Article 3 above, shall be supported by the following documents : -The statutes of the company concerned under the Algerian law; - The minutes of resolution of the Extraordinary General Meeting or any other body empowered to take such a decision, approving the decision to invest or set up representative offices abroad; - Copy of the special report of the Statutory Auditors, which establishes that the financial standing of the company permits for such investment failling, report of any other natural person or legal entity justifying an evidentiary expertise in this area; - A techno- economic study proving the compliance of the investment or the creation of any economic representative abroad with the requirements of law and specifying its impact on the foreign currency balance sheet; - An estimate budget of income and expenditures over a period of three (03 ) years.

4 Article 5 : The investment or setting up authorization by an economic operator under the Algerian law of any representative offices abroad shall be granted by the Council of Money and Credit. An annual activity report on investment and / or authorized representative (s) shall be sent each year to the Department of Exchange of the Bank of Algeria. Article 6 : The withdrawal of the authorization to set up a representative offices or invest abroad shall be pronounced by a decision made by the Governor of the Bank of Algeria, after consulting the Council of Money and Credit, in particular: - upon the request of the economic operator concerned under the Algerian law ; - In case of non compliance with legal and regulatory provisions in force in the matter ( on report on relevant services of the Bank of Algeria ) ; - In the event of adverse economic and financial developments and / or harmful to the national economy. Article 7 : Bodies and public institutions governed by public law are not concerned by the application of this Regulation, they fall under the government authorization. Article 8 : Setting up representative offices abroad of companies under the Algerian law and other investments abroad of companies under the Algerian law acquired regularly ( under the laws and regulations in force), prior to the effective date of Law of April 14 th, 1990 on the Money and Credit as amended and supplemented, shall not be subject to the requirement of prior authorization provided for in Article 2 above. Companies under the Algerian law which made investments abroad or have representative offices abroad shall be compelled, as compliance, to make the statement supported by the authorization relating thereto, which shall be addressed to Council of Money and Credit in a maximum of three (03) months from the date of enactment of this Regulation. This statement must include all information and information concerning the investment or representative offices, among others, date of achivement and / or installation, its nature, its field of action, its legal status, its location, activity report established assessed on the last three (03 ) financial years.

5 Article 9: The terms and condition for transfering the annual budgets and expenses and repatriation of income surplus of representatives abroad, as well as the transfer conditions for the realization of investments authorized under this Regulation and repatriation of proceeds of these investments shall be determined by instruction of the Bank of Algeria. Article 10: This Regulation shall be published in the Journal Officiel of People s Democratic Republic of Algeria. The Governor Mohammed Laksaci

6 REGULATION OF OCTOBER 24 TH, 2002 RELATING TO THE ISSUING AND PUTTING INTO CIRCULATION OF A METALLIC COIN OF ONE HUNDRED (100) ALGERIAN DINAR The Governor of the Bank of Algeria, Whereas the law of April 14 th, 1990 relating to Money and Credit, amended and completed by order n of February 27 th, 2001, namely to the provisions of its book I, its articles 44, paragraph a, 47 and 107. Whereas the Presidential Decrees of June 2 nd, 2001 relating to the appointment of the Governor and vice-governors of the Bank of Algeria; Whereas the Presidential Decree of June 2 nd, 2001 relating to the appointment of the regular members of the Council of Money and Credit and their substitutes ; Whereas the Resolutions of the Council of Money and Credit of August 22 nd, 2002; Promulgates the regulation the content of which follows: Article 1: The Bank of Algeria issues and puts into circulation a new metallic coin of one hundred (100) Algerian Dinar as from the promulgation of this regulation; Article 2: The technical characteristics and description of this coin are as follows: 1.1 Presentation: the coin of one hundred (100) Algerian dinar is a bimetallic type. It is constituted of an external steely crown made of grey stainless steel and inside this crown a copper-nickel heart of yellow colour;

7 2.2 Specifications : External diameter : 29,50 + 0,05 mm Heart diameter : 19,55 + 0,05 mm Crown weight : 5,60 + 0,14 g Heart weight : 5,40 + 0,11 g Total weight : 11,00 + 0,25 g Cordon thickness : 2,30 + 0,05 mm 2.3 Composition : Heart : Copper : 87 % Nickel : 13 % Crown : Steel ; AISI Description : 4.1 Obverse : A)- Principal theme : Number 100, stylized and symbolized as follows : The number 1 is represented by a palm tree engraved inside an ornament which has the architectural style of an Algerian southern door. It is straddling the heart and the crown. The 1 st number O is inside the coin. It represents, in miniature, a horse s head directed towards the right side. The 2 nd number O is straddling the drawing of the heart and the crown. I also represents in miniature a horse s head directed towards the left side. B) Words in national language : - On the upper top of the crown : Bank of Algeria (in Arabic) - on the lower part of the crown : Dinar (in Arabic)

8 4.2) Reverse side: The main theme represents a logo drawing selected to symbolize the fortieth anniversary of the Independence and youth and includes from the right to the left: - three superimposed persons heads crossed out by the word : Algeria (in Arabic) above it some flames as hair - in the middle the number 40 - on the left five (5) stars surrounding the number 40 - the text herein under is reproduced as a circle around the general outline of the coin - - the fortieth anniversary of the Independence and Youth (in Arabic) - the Date and Year : July 5 th 2002 (in Arabic) 4.3) Edge : it is fluted and includes 185 flutes Article 3 : The present regulation shall be published in the Journal Official of the People s Democratic Republic of Algeria. The Governor Mohamed Laksaci

9 REGULATION OF OCTOBER 28 TH, 2002 RELATING TO THE INTERNAL SUPERVISION OF BANKS AND FINANCIAL INSTITUTIONS The Governor of the Bank of Algeria, Whereas Law of April 14 th, 1990 relating to Money and Credit, amended and completed by Order of 4 Dhou El Hidja 1421, corresponding to February 27 th, 2001, namely its articles 43 bis, and 44, paragraphs g and I; Whereas Order of April 29 th, 1975 relating to the National Accounting Plan; Whereas the Presidential Decree of 10 Rabie El Aouel 1422 corresponding to June 02 nd, relating to the appointment of the Governor and Vice-Governors of the Bank of Algeria; Whereas the Presidential Decree of 10 Rabie El Aouel 1422 which corresponds to June 02 nd, 2001, relating to the appointment of the Members of the Board of Directors of the Bank of Algeria; Whereas the Presidential Decree of 10 Rabie El Aouel which corresponds to June 2 nd, 2001 relating to the appointment of the members of the Council of Money and Credit; Whereas the amended and completed Regulation of March 22 nd, 1992 concerning the terms and conditions that should be met by the founders, managers and representatives of banks and financial institutions; Whereas Regulation of November 17 th, 1992 relating to the accounts plan and accounting rules to be applicable to banks and financial institutions; Whereas Regulation of November 17 th, 1992 relating to the opening and publication of individual annual accounts applicable to banks and financial institutions;

10 Whereas Regulation of June 02 nd, 1994 relating to the management principles and drawing of standards pertaining to the financial sector; Whereas Regulation of December 25 th, 1994 relating to the recording of foreign currency transactions; Whereas Regulation of April 20 th, 1995 amending and completing Regulation of August 14 th, 1991 setting up the management prudential rules for banks and financial institutions; Whereas Regulation of December 23 rd, 1995 amending and completing Regulation of March 22 nd, 1992 relating to foreign exchange market; Whereas Regulation of December 23 rd, 1995 relating to the foreign exchange market. Whereas Regulation of June 08 th, 1997 relating to the recording of security operations; Whereas the Resolutions of the Council of Money and Credit of October 28 th, 2002; promulgates the Regulation the content of which follows: Article 1: The object of this Regulation is to define the content of the internal supervision that banks and financial institutions have to set up, in particular, the risk rating and evaluation system including the relevant supervision and control of such systems. Article 2: In the sense of this Regulation, we understand by: Credit Risk: The risk incurred in case of failure of any counterpart (s) considered as the same beneficiary in the sense of article 2 of Regulation amending and completing Regulation of August 14 th, 1991 and setting the management prudential rules of banks and financial institutions. Overall interest rate risk: The risk incurred in case of variation of the interest rate, due to all the balance and off-balance transactions excepting the transactions

11 subject to market risks, as the case may be. Payment risk: The risk incurred, namely in exchange transactions during the time lapse between the date at which the payment of any sold instrument that has been ordered can no longer be unilaterally cancelled and the final reception of the instrument purchased. Market risk: This is the risk relating to the rate, the deed price fluctuation, the counterpart payment risk and the exchange risk. Operational risk: It is the risk resulting from inadequate design, organization and implementation of the recording procedures in any accounting system and in the information systems dealing with all the events relating to the transactions of the bank or financial institutions concerned in general. Legal risk: It is the risk relating to any dispute with a counterpart as a result of any inaccurate data, failure or any shortcoming whatsoever, which might be attributed to the bank or financial institution, as part of its transactions. Executive Body: The persons referred to in Article 135 of the Law on Money and Credit in charge of effective determination of the orientation of the bank and financial institution activities that have been regularly approved. Deliberative body: The Board of Directors or the Supervision Council. The Auditing Committee: The Committee which may be constituted by the deliberative body to assist the latter in its duties. The deliberative body defines the composition, the terms of its operation and the conditions under which the auditors, including any person belonging to the bank or financial institution concerned, is associated to its work. The deliberative body defines the missions of said Auditing Committee. These should however, allow for: - Controlling the accuracy of the information submitted and giving an appraisal regarding the accounting methods adopted by the Bank or financial institution. - Evaluating the quality of the internal control, namely, the coherence of the evaluation, supervision and control of the risks.

12 Article 3: The internal control that banks and financial institutions should set up shall include, namely: - A control system of the internal control procedures; - An accounting organization and information processing; - Risk and result evaluation systems; - Supervision and control risk systems; - Risk supervision and control systems. Article 4: The internal control that banks and financial institutions should set up by adapting all the devices provided for by this regulation shall be adequate with the nature and volume of its activities, their dimensions and laying out, including the various risks to which they might be exposed. TRANSACTION AND INTERNAL PROCEDURE CONTROL SYSTEM Article 5: The transaction and internal procedure control system is particularly aiming, under optimum safety conditions, at: - Ensuring that the transactions comply with the regulatory and legal provisions, the standards, professional and deontological practices and with the orientations of the deliberative body: - Ensuring the observance of the decision - making procedures with respect to any risks whatsoever, and the management standards determined by the executive body, particularly, in case of limited management standards; - Ensuring the quality of the accounting and financial data whether it is sent to the executive and deliberative bodies or transmitted to the Bank of Algeria, the Banking Commission or whether it is to be published; - Ensuring the conditions of evaluation, recording, keeping and availability of the accounting and financial data, in particular by ensuring the auditing lead in case of computer processed data; - Ensuring the quality of the computer and communication systems.

13 Article 6: Banks and financial institutions should organize their control systems in order to: - Ensure a regular control thanks to a series of means utilized on a regular basis within the operational units to guarantee that the transactions completed are regular, valid and secure and that other instructions or orientations connected with the risks of any nature associated to such transactions are observed. - Ensure, according to an adapted periodicity, that the transactions are regular and in compliance with the specifications, the procedures are adhered to and that the devices provided for in the above-mentioned paragraph are efficient, namely, that they are adequate with the nature of all the risks associated with the transactions. Article 7: The organization of banks and financial institutions should ensure strict independence between the units in charge of the transactions and the units in charge of their validation, accounting and settlement validation in particular, as well as the follow-up of the instructions or the orientations connected with risk control. Article 8: The independence between the units in charge of the transactions undertaking and the units in charge of their validation may be organized either by a different hierarchical system different from that of these units up to a level sufficiently high, or by an organization that clearly separates the various positions. This could be achieved either by procedures, computerized procedures in particular, that would be designed for this purpose. Banks and financial institutions may be able to prove that such are adequate. Article 9: The devices referred to in Article 6 of this regulation that control that these transactions are regular and in compliance with the specifications must be operated independently with respect to all the structures that are the object of their missions. Article 10: Banks and financial institutions should designate an executive officer who will be responsible for ensuring that the internal control is coherent and efficient. He will report his mission to the executive body and to the audit committee, as the case may be. The executive body should inform the deliberative body of the appointment of the executive officer and of the reports of his works. When the dimension of the bank or that of the financial institution does not justify the appointment of a person specifically responsible for ensuring the

14 coherence and efficiency of the internal control, the executive body must ensure - under the supervision of the deliberative body - the coordination of all the devices that are connected with the completion of the mission concerned. Article 11: Banks and financial institutions should ensure that the number of qualified persons who participate to the control of these operations and of that of the internal procedures, including the means put at their disposal, namely, the follow-up instruments and the risk rating methods, are adapted to the activities, dimension and laying out of the bank or financial institution concerned. Article 12: The means employed to ensure that the transactions are adequate and regular with the procedures and other instructions or orientations connected with the risk rating of said transactions, whatsoever are observed - should be sufficient so that the complete investigation cycle relating to all the activities over the required financial year, may be carried out. A mission control system should be set up at least once a year. The annual goals with respect to control that have been determined by the executive and deliberative bodies should be integrated in such system. Article 13: Banks and financial institutions should ensure that the transactions and internal procedure control system is integrated within the organization, methods and procedure of each of their activities and that the controls as provided for in Article 6, paragraph two ( 02) above, apply to the bank or financial institution as a whole, including its subsidiaries and agencies. Article 14: The risk rating and limit determination systems should be reexamined on a regular basis in order to check their performance with respect to the development of the activity, environment, markets or analysis techniques. Article 15: When the bank or financial institution decides to undertake transactions connected with the new products for the bank or financial institution or the market, the control system should allow for: - Ensuring that a prior and strict risk specific analysis has been carried out; - Ensuring that the adequacy of the limit and risk rating procedures incurred is effective. - That the adaptation to the existing procedures is undertaken, as the case may be.

15 II- ACCOUNTING ORGANIZATION AND DATA PROCESSING Article 16: Banks and financial institutions should observe the general provisions of the National Accounting Plan and those of Regulation relating to the banking accounts plan and accounting regulations applicable to banks and financial institutions, taking into account the following specifications: 1)-As regards the information included in the balance, off- balance accounts and results published and that contained in the accountancy schedules, the organization set up should guarantee the existence of all the procedures, called audit track, which will permit: - To re-set up the operations according to a chronological order - To justify any information with the original document through which it will be possible to come back through an uninterrupted process to the summary and reciprocally; - To explain the development of the balances on the basis of one statement to the other, by keeping the movements of money that have affected the accounting items. Notably, the account balances that are reported in the Accounting Plan should, directly or by grouping, be connected to the items and sub-items of the balance, off-balance and profits and loss accounts and to the information extracted from the accountancy and contained in the schedule. An account balance may be connected through bursting, provided that the observance of the safety rules and adequate control are justified and that the bank or financial institution concerned describes the method used. 2)-As regards the accounting information reported in the documents sent to the Bank of Algeria or to the Banking Committee and that required for the evaluation of the management standards, it should observe the chronological order of the operations. Such information could also be justified by original documents. Each amount reported in the statements, attached tables, and in the declarations concerning the management standards and in the other documents submitted to the Bank of Algeria or to the Banking Committee, should be controllable, namely on the basis of the detailed items that compose it. When the Bank of Algeria or the Banking Committee agrees that such information be submitted to their services as a statistical data, these should be controlled.

16 Article 17: Banks and financial institutions must ensure that the information and methods of evaluation and accounting are good, exhaustive, reliable, particularly, by: - Periodically checking that the parameters and methods used for evaluating the operations in the management systems are adequate; - Periodically checking that the accounting diagrams with respect to the general safety and prudential goals are relevant and that they are in compliance with the accounting regulations in force. - By carrying out a monthly comparison between the operational management results calculated and those carried while observing the evaluation rules in force as far as the transactions entailing market risks are concerned. Any gaps recorded should be identified and analyzed. Article 18: Banks and financial institutions determine the computer safety level that seems advisable in view of their practice requirements. They ensure that their information systems are permanently integrating that minimum safety condition required. Article 19: The information system control should, namely, allow for: - Ensuring that the safety level of the information systems is periodically evaluated and that the relevant corrections have been effected, as the case may be; - Ensuring that computerized emergency procedures are available in order to ensure continuous running in case of any difficulties in the computer systems operation. Control of the computer systems includes information keeping and documentation relating to the analysis, planning and carrying out of the processing. Article 20: Banks and financial institutions are compelled to keep up all the files required for the justification of the documents of the latest statement submitted to the Bank of Algeria and to the Banking Committee at least up to the date of the following statement. Article 21: The assets held by the bank or the financial institutions on behalf of third parties and which are not recorded in the annual individual accounts should be subject to accountancy or to a follow-up detailing the inputs and outputs and existing items. An apportioning is effected, if it is significant, between the items held as a simple depositary and those that guarantee either any credit granted or a commitment made for specific purposes or in view of a general and permanent agreement in favor of the depositor.

17 III RISK AND RESULT ASSESSMENT SYSTEMS Article 22: Banks and financial institutions should set up risk and result assessment and analysis systems by adapting them to the nature and volume of the operations so that to avoid the risks of different nature to which such operations are exposed, namely credit, market, and interest, liquidity and settlement risks. A. SELECTION AND ASSESSMENT OF CREDIT RISKS Article 23: Banks and financial institutions should work out a risk and credit selection procedure as well as an assessment risk system. Such systems should allow for: - Centrally identifying their balance and off-balance risks with regard to a counterpart or to group-counterparts, as defined in Article 2 of Regulation of April 20 th, 1995 mentioned above. - Dreading the various categories in the risk levels on the basis of qualitative and quantitative information in compliance with Article 07 of Regulation of April 14 th, 1991 mentioned above.; - Proceeding with the overall apportionment of their commitments in favor of their counterparts according to the risk level incurred, legal and economic sector and according to the geographical area. a) Credit and risk selection systems Article 24: The credit assessment risk should, namely, take into account the items relating to the financial position of the beneficiary, to his reimbursement ability and to the guarantees received, as the case may be. As regards enterprises, in particular, the assessment operation should integrate the analysis of their environment, the characteristics of their partners or shareholders and managers. It should also take into account the most recent accounting documents. Banks and financial institutions should constitute credit files that are to receive all the qualitative and quantitative information on a counterpart and on groupcounterparts. These files should be completed at least on a quarterly basis as far

18 as counterparts whose claims are unpaid or bad, or whose volume of claims is significant, are concerned. Article 25: Selection of credit operations should also include their productivity criteria. The projected analysis of charges and products, whether they are direct or indirect, should be as exhaustive as possible, for each credit and namely concern the operational and financial costs, the equity capital remuneration costs. The analysis should also include the charges corresponding to the risk assessment pertaining to default payment by the beneficiary during the credit transaction. Article 26: The executive body carries out at least half-yearly, a posteriori analysis of the credit transaction productivity. Article 27: Decision - making procedures concerning loan granting or signed commitments, chiefly when these are organized according to the designated delegations, should clearly be adapted to the characteristics of the bank or financial institution in relation to its dimension, organization and nature of its activity. Article 28: When the nature and importance of the credit transactions require it, banks and financial institutions ensure that the loan decisions or signed commitments are made by at least, two persons and that the credit files are subject to an analysis per specialized unit, independent from the operational entities. b)credit risk assessment system Article 29: Banks and financial institutions should set up a credit and risk assessment system that will allow for identifying, evaluating and aggregating the risks relevant to all credit transactions for which the bank or financial institution has incurred a failure risk on the part of a counter-part or group-counterparts. Article 30: Banks and financial institutions should proceed, at least on a quarterly basis, with an analysis of the development of the quality of their commitments (balance and off-balance). Such analysis should allow for a reclassification of credit transactions, carrying the classified claims and providing for the relevant provisions, taking into account the guarantees taken and ensuring that their assessment is recent and independent.

19 B. MARKET RISK ASSESSMENT SYSTEM Article 31: Banks and financial institutions should - until the articles concerning the evaluation method, the assessment and cover of the market risks are promulgated - set up follow-up systems relating to the market transactions carried out on their own account. They should, in particular: - Record, on a daily basis, exchange transactions in compliance with the provisions of Regulation relating to the above-mentioned market exchange and to the transactions concerning their portfolio transactions and calculate their results: - Assess their exposure to foreign exchange risks per foreign currency and per all the currencies. C. RISK AND INTEREST RATE ASSESSMENT SYSTEM Article 32: Banks and financial institutions should until the articles concerning the risk and interest rate assessment and cover are promulgated - endeavor to set up an internal information system thanks to which the interest risk will be dreaded. Thus, they should ensure its follow-up and provide for any corrective actions in case of any significant exposure to this type of risks. D.ASSESSMENT SYSTEM OF THE RISK SETTLEMENT Article 33: Banks and financial institutions should set up an assessment system of their exposure to the settlement risk, more particularly to that incurred in foreign exchange transactions. They should see that the various settlement process stages are dreaded. IV RISK SUPERVISION AND CONTROL SYSTEMS Article 34: Banks and financial institutions should set up credit, exchange rate, liquidity and settlement risk supervision and control systems. These should show up the internal limits and the conditions under which such limits should be observed. Also, they should be provided with means adapted to the legal and operational risk control. Article 35: The credit, exchange rate and liquidity risk supervision and control should include a device controlling the overall internal limits. Said limits should be reviewed as required, at least once a year, by the executive body and the deliberative body, as the case may be, taking into account the equity capital of the bank or financial institution concerned. The operational limits that may be

20 determined at the level of the various internal organic entities (directions, agencies, branches etc ) should be coherent with the overall limits. The various overall and operational limits should be homogeneously determined with regard to the existing risk assessment systems. The interest and settlement risk supervision and control systems should, at the very beginning, include follow-up systems in order to correctly avoid such risks and determine,further on, limit systems that are at least operational in case of any problem in the determination of the overall limits. Article 36 : The banks and financial institutions that have been authorized upon their request by the Bank of Algeria to proceed, by delegation of authority, with foreign exchange control, should be provided with an internal control system that will permit to continuously ensure the follow-up of external trade transactions. The device to be set up in accordance with Regulation mentioned above, should allow for: - Ensuring the tracing of a regular and timely auditing of the opened domiciliation files; - Ensuring the completion of the transactions before the submission of the reports - Ensuring that the financial flow and the goods and services flow existing between Algeria and other foreign countries are adequate. Article 37: Banks and financial institutions should see that the record and repayment schedule of the external debt of their clients and that incurred on their behalf is updated. Article 38: Banks and financial institutions should be provided with devices based on formal procedures, allowing for: - Permanently ensuring the compliance with the procedures and limits determined; - Proceeding with the analysis of the causes of any non-compliance with the procedures and limits specified; - Advising the entities or the persons designated for this purpose of the importance of the stepping over and corrective actions proposed or undertaken. In the case where the limits are assessed per internal organic entities, and where such limits may be reached, the formal procedures should enable the entities concerned to refer to the appropriate hierarchical level.

21 V INFORMATION AND DOCUMENTATION SYSTEM Article 40: The deliberative organ of the bank or that of the financial institution proceeds, at least twice a week, with the examination of the activity and that of the internal results on the basis of the information it receives from the executive organ and from the executive officer mentioned in Article 10 and from the audit committee, as the case may be. Should such audit committee exist, the aforementioned examination may be carried out annually. Article 41: The executive organ regularly informs the deliberative organ and the audit committee, as the case may be, of the main items and instructions that come out of the level of risks to which the bank or financial institution might be exposed. Said information chiefly concerns the allotment of the commitments made per group of counterparts and the credit transactions yield, as indicated in Article 25 of this Regulation. Article 42: In the case where the deliberative organ has not been associated to the limit determination, the executive organ should inform the latter and also, the audit committee, as the case may be, of the decisions made in this respect. The executive organ should inform the deliberative body at least, once a year, of the conditions under which the limits specified are observed. Article 43: Banks and financial institutions elaborate the procedure books relevant to their various activities. Such books should describe, at the minimum, the recording, processing and restitution methods of information; the accounting schedules and transaction commitment procedures. Also, they should work out a documentation stating precisely the means intended to ensure the good running order of the internal control, namely; - The various levels of responsibility; - The attributions entrusted and devolved and the means affected to the operation of the internal control devices; - The rules ensuring the independence of such devices; - The procedures relating to the safety of the computer and communication systems; - A description of the safety assessment system; - A description of the risk supervision and control systems;

22 Upon request of the concerned parties, said documentation should be put at the disposal of the executive and deliberative bodies, auditors, inspectors of the Bank of Algeria and the audit committee, as the case may be. Article 44: The reports made after the controls which have been effected - as part of the verification o f the transaction compliance and regularity, the observance of the procedures and efficiency of the devices guaranteeing the regularity, safety and validation of the transactions carried out are communicated to the executive organ and, upon its request, to the deliberative organ and audit committee, as the case may be. Article 45: Banks and financial institutions should draw up, at least once a year, a report concerning the conditions under which the internal control is ensured. Such a report shall include namely: - An inventory recording the investigations carried out and main information noted, in particular, the main shortcomings that have been detected and the corrective actions undertaken. - A description of any significant modifications performed in the internal control during the review period. - A description of the conditions under which the procedures set up for new activities are implemented. - A description of the main actions projected in the internal control field. Article 46: Banks and financial institutions should draw up, at least once a year, a report concerning the control and assessment of the risks to which they are exposed. Such report shall include, essentially, the main items and information that might show up from the risk assessment to which they are exposed, the credit risk selection as well as the analysis of the credit transaction yield. Article 47: The two annual reports provided for in Articles 45 and 46 above, shall be communicated to the deliberative body and to the audit committee, as the case may be. They shall be sent to the Banking Committee and put at the disposal of the auditors. Article 48: This Regulation shall be published in the Journal Officiel of the People s Democratic Republic of Algeria. The Governor Mohamed LAKSACI

23 REGULATION COMPLETING REGULATION OF AUGUST 14 TH, 1991 RELATED TO THE MONEY MARKET ORGANIZATION The Governor of the Bank of Algeria: Whereas the amended and completed Law of April 14 th, 1990, relating to Money and Credit, namely its articles 43 bis, 44, 47 and 55; Whereas the presidential Decree of 10 Rabie El Aouel 1422 corresponding to June 2 nd, 2001 relating to the appointment of the Governor and Vice-Governors of the Bank of Algeria; Whereas the presidential Decree of 10 Rabie El Aouel 1422, corresponding to June 2 nd, 2001 relating to the appointment of the members of the Board of Directors of the Bank of Algeria; Whereas the presidential Decree of 10 Rabie El Aouel corresponding to June 2 nd, 2001 relating to the appointment of members of the Council of Money and Credit; Whereas Regulation of August 14 th, 1991 relating to the organization of the money market; Whereas the Resolutions of the Council of Money and Credit of December 19 th, 2002; Promulgates the regulation the content of which follows:

24 Article 1: The provisions of Regulation of August 14 th, 1991 mentioned above are completed by Article 9 bis that reads as follows: Article 9 bis: Lending and borrowing processes including firm purchase and sale of bills between banks and financial institutions shall compulsorily be negotiated within the money market. Article 2: This Regulation shall be published in the Journal Officiel of the People s Democratic Republic of Algeria. The Governor Mohamed LAKSACI

25 REGULATION AMEND AND SUPPLEMENT REGULATION OF APRIL 6 TH, 1997 RELATING TO THE CONDITIONS OF SETTING-UP BANKS AND FINANCIAL INSTITUTIONS NETWORK The Governor of the Bank of Algeria, Whereas Law of April 14 th, 1990 on Money and Credit as amended and supplemented, in particular its Articles 43a, 44, 47; Whereas the Presidential Decree of Rabie El Aouel 10 th,1422 corresponding to June 2 nd,2001 on the appointment of the Governor and Vice- Governors of the Bank of Algeria ; Whereas the Presidential Decree of Rabie El Aouel 10 th, 1422 corresponding to June 2 nd, 2001 on the appointment of Members of the Board of Directors of the Bank of Algeria ; Whereas the Presidential Decree of Rabie El Aouel 10 th, 1422 corresponding to June 2 nd, 2001 on the appointment of Members of the Council of Money and Credit; Whereas Regulation of March 22 nd, 1992 on the conditions to be fulfilled by the founders, leaders and representatives of banks and financial institutions; Whereas Regulation of January 3 rd, 1993 setting the conditions for the establishment of bank and financial institution and setting up of branch of foreign bank and financial institution ; Whereas Regulation of April 6 th, 1997 on relating to the conditions of setting-up banks and financial institutions network; Whereas the Resolution of the Council of Money and Credit of December 19 th, 2002 ; promulgated the Regulations which reads as follows:

26 Article 1 : The object of this Regulation is to amend and complete Regulation of April 6 th, 1997 relating to the conditions of setting-up banks and financial institutions network. Article 2: The provisions of Article 2 of Regulation of April 6 th, 1997 referred to above shall be amended to read as follows: "Art 2 : Any opening of a new Counter shall be subject to the prior express authorization of the Bank of Algeria. This authorization is granted on the basis of a file relating to each counter and delivered in support of the annual program for developing the network of banks and financial institutions appreciated, especially, on the basis of financial and managerial capacity of the applicant. The component of the file referred above shall be determined through Instruction of the Bank of Algeria. Banks and financial institutions shall be compelled to report to the Bank of Algeria, any transformation project, transfer or closure of counters. " Article 3 : The provisions of Article 3 of Regulation of April 6 th, 1997 referred to above shall be amended to read as follows: "Art 3: As from the date of promulgation of this Regulations, any application for authorization to open bank or financial institution counter shall be sent to the Bank of Algeria within at least two (02 ) months prior the expected date of implementation of the annual development program. " Article 4 : The provisions of Article 7 of Regulation of April 6 th, 1997 referred to above shall be amended to read as follows: "Art 7: It is understood by opening the setting up of a new counter. The application for authorization to open bank or financial institution counter shall underline... The rest remains unchanged. "

27 Article 5 : The provisions of Article 12 of Regulation of April 6 th, 1997 referred to above shall be amended to read as follows: "Art 12: The Bank of Algeria shall ensure compliance with the conditions of implementation referred to in Articles 7 and 8 above.... The rest remains unchanged. " Article 6: This Regulation shall be published in the Journal Officiel People s Democratic and Republic of Algeria. The Governor Mohammed Laksaci